Gas discovery and investment in Mozambique
When in 2010 Texas-based energy company, Anadarko Petroleum found one of the world’s largest untapped gas reserves off the coast of Palma, a tiny town in Mozambique, what the area didn’t have were hotels, or much of anything else.
The good news about Palma today is not only about the discovery and boom in the natural gas, it Is also about the revolution in real estate development by foreign investors in this remote, out-of-town village boasting a population of just a few thousands of people.
Nexar Group, the Spain-based developer, which is spending about $1 million to build its hotel named Karibu Residence 1, is betting it can charge hundreds of dollars a night to those who want air conditioning, wireless internet access and other business-class amenities in this remote African village.A Wall Street Journal story on Palma and the real estate development, as a result of the gas boom, reports that many oil-industry workers and executives will need a place to stay, adding that Nexar isn’t the only one making that bet.
African Century, an investment firm, is also spending $2 million in Palma to build an industrial park, hotel and serviced apartments. In Pemba, a nearby town, property developer, Pembaland, plans to spend $6 million to build apartments. Carlson Rezidor Hotel Group is considering adding more hotels in Pemba. Its local partner, Rani Resorts, currently operates one of the city’s most expensive hotels, charging $300 a night.
This, for us, is not just an exciting development, it is also a bit of a challenge and an eye-opener for us as nation so richly endowed with a large reserves of gas. Palma is a bird’s eye-view of the immense potential in gas development that Nigeria seems to have given, over the years, little or no attention to. The multiplier effect of a full blown gas development in terms of increased construction activities for roads, hotels, offices, retail centres etc which lead to employment generation, seems to be lost on Nigeria and its planners.
An estimated 10,000 workers and executives will be moving to Palma, now regarded as Mozambiques’s future gas capital. Many of the arriving workers will be employed by contractors connected to the oil companies and housed in makeshift camps. Others will need a place to stay.
From the Palma experience, it could be seen how a conscious development of a nation’s natural resource draws investment interest and engenders development of its rural communities like Palma.
For the investors, too, the benefits of investing in rural communities are inviting and though big companies aren’t going to remote places like Palma, those that are see the benefit of being among the first to arrive is high, predicting it would take Nexar less than four years to make back its investment. Pembaland’s Brian O’Donohue says real-estate companies building now can get annual returns in the 15 percent-to-20 percent range.
We point out however, that if Nigeria is not seeing the kind of investment around its gas reserves in the remote communities, it is because the risks are high. Like Mozambique, Nigeria needs a lot of investment to build to its gas sector and, if Nigeria’s purported “Gas revolution” doesn’t happen neither will the jobs and real estate investments. In both countries, developers say the costs of investing in remote markets are higher than they are in the US and Europe.
Nigeria is a country where you really need to do it all yourself. For the country to attain its full potential for economic growth and development it is time to start addressing the challenges posed by critical infrastructure, especially access roads and power.